Fashion chain challenged
Quiz on course for £3 million savings as revenue falls
Tough climate for fashion stores
Quiz, the Scottish fashion chain, saw a 5% fall in revenue over the last six months as it seeks up to £3 million in cuts to improve margins.
Overall, the group’s trading has been broadly in line with the board’s expectations against the backdrop of a difficult UK retail environment.
Group revenue in the period decreased to £63.3m (H1 2019: £66.7m). Gross margin for the period is expected to be in line with expectations at approximately 61%.
Online revenues grew by 7% to £20m (HI 2019: £18.7m), once adjusted for unprofitable revenue streams terminated during the year.
Investment in the group’s own websites has see sales increase by 12% year-on-year.
The Glasgow-based company said trading conditions on the UK high street have remained “very challenging”.
The Group’s stores and concessions have experienced a reduction in footfall during the period against the prior year, resulting in weaker than initially anticipated sales.
Sales in the Group’s UK standalone stores and concessions decreased by 11% to £31.3m in H1 2020 (H1 2019: £35.1m). The rate of decline experienced has reduced in recent weeks.
“We continue to focus on improving the performance of our physical retail outlets and continue to believe in their importance to our omni-channel model and we are actively managing our stores and concessions to ensure their profitability.
“The average lease length on our stores remains relatively low at 26 months and we continue to appraise the economics of each store as leases come up for renewal.
“Our international sales comprise stores and concessions in the Republic of Ireland and Spain as well as franchise operations in a number of countries. International sales increased by 3% to £12.0m in H1 2020 (H1 2019: £11.6m) reflecting growth in revenue from the franchise operations and Spanish stores.
“This growth is partially offset by a decline in sales in Irish stores and concessions consistent with the pattern experienced in the UK.”
At 30 September 2019, the group had net cash of £7.1m (31 March 2019: £7.5m).
The board said it was confident of achieving savings of between £2m and £3m to improve the gross margin generated, reduce costs across the business, and halt the decline in footfall in stores and concessions.
Tarak Ramzan, chief executive, said: “Overall, the group’s trading performance in the first half has been broadly in line with the board’s expectations despite the difficult UK trading environment. Sales growth through Quiz’s websites has continued, reflecting the investment in our product range and marketing initiatives.
“Whilst trading conditions are expected to remain challenging in the near term, the Board remains confident that underpinned by Quiz’s flexible business model and an increasing online focus, the group can return to sustainable profitable growth in the medium term.”
Quiz announce its interim results for the six months to 30 September on 4 December.
Arlene Ewing, investment manager at Brewin Dolphin, said: “The tough backdrop for retail continues to take its toll on Quiz. Overall sales are on the decline, but the one bright spot is the online offering which has seen decent growth.
“Investors will have a keen eye on the results of the root and branch review announced earlier in the year, particularly the company’s plans for some of its units in costly shopping centres – albeit, a combination of bricks and mortar and online appears to be the way forward for retailers.
“There is, nevertheless, some significant work required to turn the tide at Quiz, making it self-sufficient and able to handle the shocks faced by the wider sector.”